Halozyme Therapeutics, Inc.

Q1 2021 Earnings Conference Call

5/10/2021

spk01: Good day and thank you for standing by. Welcome to the Halosign first quarter 2021 financial results conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today, Al Khaldani, Vice President of Investor Relations and Corporate Communications. Thank you. Please go ahead.
spk02: Thank you. Good afternoon and welcome to our first quarter 2021 financial results conference call. In addition to our press release issued today after the close, you can find a supplementary slide presentation that will be referenced on today's call in the investor relations section of our website. Leading the call will be Dr. Helen Torley, Halos Arms President and Chief Executive Officer, who will provide an update on our business, and Elaine Sun, our Chief Financial Officer, who will review our financial results for the first quarter. On today's call, both GAAP and non-GAAP financial measures will be discussed. The non-GAAP or adjusted financial measures are reconciled with the comparable GAAP financial measures in our earnings press release and slide presentations. During the call, we will be making forward-looking statements. I refer you to our SEC filings for a full listing of the risks and uncertainties.
spk00: I'll now turn the call over to Helen.
spk08: Thank you, Al. I'm pleased to report that our first quarter results provided a strong start to 2021 for Halazan. quarter revenues of $89 million, fueled by record quarterly royalties of $36.9 million, gap earnings per share of 19 cents, and non-gap adjusted earnings per share of 37 cents. Our partners made critical progress in the clinic with therapies using in hand. In the first quarter, we achieved two of the expected four phase three trial starts for 2021, which is defined as first patient enrolled. And we also achieved two of the expected five phase one trial starts for 2021. Additionally, we completed a successful convertible note offering of $805 million on attractive terms and used a portion of the proceeds to retire a large portion of our existing convertible note and to repurchase $75 million worth of shares through an accelerated share repurchase, further demonstrating our commitment to capital return. We achieved these strong results against the backdrop of the ongoing global COVID pandemic. This has been accomplished by the strong performance and hard work of our partners, our contract manufacturers and suppliers, and the entire Halazine team. Let me now discuss our royalty revenue growth, which is illustrated on slide three. We achieved our highest ever level of quarterly royalties during the first quarter at $36.9 million. This represented 119% growth year-over-year and 15% sequential growth, following what had previously been our record quarterly royalties. This strong growth has primarily been driven by the successful ongoing global launches of Janssen's subcutaneous forms of Darzalex, which utilize our enhanced technology. We continue to project in this high-margin, recurring revenue stream. Let me turn now to slide four, where I'll provide highlights of our key commercialized products. We have five products that are now approved in most major global markets using our enhanced technology. Globally, more than 500,000 patients have received commercial products utilizing Enhanced. Let me begin with the most recently launched products, which represent our Wave 2 launches, Darzalex SC and Fezgo. During the first quarter, Janssen's parents, Johnson & Johnson, reported worldwide sales of Darzalex, including both the IV and SC forms, of $1.37 billion, up 42% year-over-year on an operational basis. J&J does not provide a breakdown of Darzalex sales by indication or route of administration. However, they did comment that the impressive growth was attributable to share growth across all lines of therapy and increased penetration of the Stabaputinib formulation in the U.S. and Europe. and also continued Darzalex penetration in the frontline setting, aided by recently approved line extensions that penetrate new patient populations, posting nearly three points of shear growth in frontline in the U.S. this quarter. During the first quarter, Janssen also reported several important achievements that are expected to support the future growth of subcutaneous Darzalex. These include USFD accelerated approval and Health Canada approval for the indication of newly diagnosed adults with light-chain amyloidosis for the use of Darzalex-Baspro in combination with bortezomib, cyclophosphamide, and dexamethasone. I'll note that there were no previously approved therapies for this disease. And also the approval from Japan's Ministry of Health, Labor, and Welfare for the subcutaneous formulation of Darzalex for the treatment of multiple myeloma. Accordingly, Halazan recognised $5 million in milestone revenue. With strong operational momentum, expansion into new geographies and expansion into new indications, we continue to expect that Darzalex will be a strong driver of royalty growth for Halazan. The second product that we're waiting to launch is Aspezgo, the fixed-dose combination of two of Roche's antibodies, Progetta and Perceptin. administered in a five to eight minute subcutaneous injection compared to an administration time for several hours for the IV. Fezgo was launched in the U.S. in the third quarter of 2020 and in the initial European launch markets during the first quarter of 2021. The European launches followed regulatory approval in Europe in late December of 2020. In the first quarter, Roche reported Fezgo sales of 29 million Swiss francs. We anticipate the continued adoption and use in the U.S. and additional launches in Europe throughout 2021, once reimbursement is in place, will result in robust growth.
spk00: Following the strong initial launch of Darzell XSC in 2020, we project Darzell XSC will continue to be the key driver of royalty revenues and royalty revenue growth for Halobine in 2021.
spk08: And we move now to the Wave 1 launch product. Roche continues with its global commercialization of Navvera SC, also called Retoxin Hystella, and Substanix Herceptin and Herceptin Hylecta. We project continued decline in royalties from these mature products as a result of the ongoing impact of biosimilar competition.
spk00: I'll begin with an overview and then I'll move on. What is very exciting
spk08: is that we project the expansion and maturing of our development pipeline to 16 products by the end of 2021, including an expectation that four products will be studied in Phase 3 clinical trials and a total of 12 products will be in or will have completed Phase 1 clinical trials. I've highlighted on slide 5, in the first quarter, we saw strong progress with four new clinical trial starts, including two Phase 3 studies and two Phase 1s. Today, we have two products that are in Phase 3, Ogenix's F-Critizumab and Roche's Etizolizumab, and we expect two additional Phase 3 starts this year, one of which is BMS's Nivolumab.
spk00: The products in Phase 3 programs comprise our four Phase 3 products represent potential launches in the 2023 to 2025 timeframes.
spk08: As I mentioned, we have 12 products that we project will be in or completing phase one by the end of 2021. These products form our potential wave four product launches, where if development continues, these could launch within the time window of 2025 to 2027. We believe that this advancing pipeline of products utilizing Enhance is setting up the potential for multiple waves of future product launches that will deliver long-term growth in revenues, cash flow, and profitability. Now let me provide the brief discussion by partner, and I'll begin with Bristol-Myers Squibb. Bristol recently posted an overview of the design of its planned Phase III study of subcutaneous nivolumab for the treatment of clear cell renal cell carcinoma on clinicaltrials.gov. With a study start in sight, accordingly, we recognize 25 million. We're very excited for this important next step for subcutaneous nivolumab as one of our potential Wave 3 launches. In parallel, Bristol is continuing with an exciting set of immuno-oncology target clinical studies, having publicly announced selection of five of the available 11 targets. In addition to nivolumab, Bristol has three ongoing or completed Phase I studies within hand. These include studies of anti-CD73, TIM3, and fixed-dose combination of nivolumab and volatilumab. Let me move now to our newest partner, Horizon Therapeutics. We're delighted to share that, as announced by Horizon last week, not only have they initiated a Phase 1 study of tepeza equalizing enhanced, but they've already completed patient dosing. The trial is a small, single-dose, Phase 1 pharmacokinetic trial, evaluating use of enhanced with tepeza. If development is successful, Horizon hopes to potentially shorten drug administration time, reduce healthcare practitioner time, and offer patients suffering from thyroid eye disease additional flexibility and convenience. This development represents remarkably fast progress, given that we signed our collaboration agreement with Horizon in November of last year. We look forward to further developments in this exciting program for a drug that has anticipated peak sales potential of $3.5 billion, according to Horizon. Let me now move to Ergenix. Ergenix has two targets in development using enhanced F-cortisumab and ARJX117. Argenix continues with the execution of its four phase three trials for four separate potential indications for F-cortisimod SC utilising at hand. Let me briefly describe these four registration enabling studies.
spk00: In February, Argenix announced a goal decision for its ATIER registration trial, evaluating subcutaneous F-cortisimod.
spk08: within hands in chronic inflammatory demyelinating cholineropathy, or CIDP. Argenix has continued enrollment after the planned safety and efficacy assessment and expects to include approximately 130 patients to support potential registration of SCF Gratitumon for the treatment of CIDP. In January, Organixx initiated its Phase III address trial in Pempitis vulgaris and foliaceus to serious, in-barrier diseases associated with painful blistering, and these studies continue to enroll.
spk00: Moving on to the third restoration trial and potential indication.
spk08: Argenix met with the FDA in the first quarter to discuss the potential for a bridging study of SCF cortisomide in myasthenia gravis, or MG. Following FDA feedback, Argenix has moved forward with a small focus trial designed to enable a fast path to registration for SCF cortisomide. Energenic also continues with its fourth potential indication, the Phase III trial evaluating SCF Carticumon within hands is one of our potential Wave III lunges in the 2023 to 2025 timeframe, and we're delighted with the progress to date.
spk00: And lastly, Energenic, development continues with its second nominated target, ARGX117, which is being evaluated in in a recently initiated Phase 1 study in healthy volunteers.
spk08: Let me now move to Roche. Roche is two products in development within HANZ, Ticentric and Ocrevus. The Phase 3 trial evaluating Ticentric SC within HANZ in Stage 4 non-small cell lung cancer is ongoing with the potential to launch in the 2023 to 2025 time window. And Roche also contains Ocrevus within HANZ. Ocrevus is another approved blockbuster product and is indicated for patients with multiple sclerosis. I'll move now to Janssen. In addition to the successful launch of subcutaneous forms of Darzalex, Janssen continues with a phase one study of amibab, their EGFR and CMEK bispecific antibody within hand in advanced solid tumors. We're pleased with the progress our partners are making in advancing therapies using our enhanced technology. All of this progress I've just described is setting up multiple ways of future potential approval and revenue growth for Halazan. And just before I close on the enhanced partners, I'd like to report progress on the second program that entered Phase 1 clinical testing during the first quarter. In 2019, we announced the Cooperative Research and Development Agreement, or CRADA, with the National Institute of Allergy and Infectious Diseases Vaccine Research Centre, or VRC, which is part of the National Institutes of Health. The CRADA enabled us to use our enhanced technology to develop sub-community forms of broadly neutralizing antibodies against HIV for the treatment of HIV. I'm pleased to report that the program recently dosed the first patient in the enhanced arms of the DRC609 Phase 1 trial, which will investigate the safety, tolerability, dose, and pharmacokinetics of the broadly neutralizing antibody N6LS, which will be administered intravenously and subcutaneously with insurance in healthy adults. As you have heard, our partners are making impressive progress across a broad development pipeline in diverse indications. And beyond this existing pipeline, there's also the potential for us to drive additional, and I'm confident we will find additional appeals as ever, the timing is difficult to predict. And there's also the potential for growth for our current partners, nominating new targets and advancing them into the clinic. With more than 20 open slots available, we're excited for the growth opportunity that also exists here. Let me move now to slide six to discuss how our pipeline progress drives revenues for Halazan. We are reiterating our three-year outlook for projected revenues from milestones.
spk00: You can see here that for 2021, $50 million in milestone revenues. Patients for partner upfront development. The blue bars represent our three-year outlook since 2000. The green bars represent actual annual milestone revenues, demonstrating that we're providing This near-term milestone revenue is an important and strong indicator for future royalty revenues.
spk08: We've reached approximately $1 billion in 2027, based on non-risk-adjusted revenue projections for programs that we currently have line of sight to, and assuming global sales in all indications. Turning now to slide seven, I'll review our approach to value creation and capital returns. we have been consistent regarding our three capital return priorities. These include maintaining a strong balance sheet and commitment to driving both internal and external growth. We have a strong balance sheet of cash and cash equivalents of $764 million following the successful completion of our 2027 convertible note offering in March. We anticipate the strong projected free cash flow driven by Enhance will support both our ongoing commitment to capital return as well as our longer M&A strategy. We've made strong progress with our three-year $560 million share repurchase program with approximately $426 million completed to date at an average price of $21.99. And in addition to supporting the ongoing growth of our enhanced technology franchise, we continue to evaluate the potential for new technology platform expansion through acquisition with the goal of accelerating and extending long-term revenue growth. We see the opportunity to create incremental value for other platform technologies, applying Helizine's proven partner and commercialization capabilities. With Enhanced still early in its growth cycle, we have the opportunity to be highly selective here. And with that update, I'm going to turn the call now over to Elaine for a discussion of the first quarter financial results. Elaine?
spk06: Thank you, Helen. Before I begin, I'd like to note that with this quarter's results, we'll begin reporting key measures on both a non-GAAP adjusted as well as a GAAP basis, and we'll also provide financial guidance on a non-GAAP basis. We consider these non-GAAP financial measures to be important because they provide useful measures of our operating performance, exclusive of factors that do not directly affect what we consider to be our core operating performance, such as stock-based compensation, amortization, as well as non-recurring or unusual events. And I'd ask you to refer to our press release and filings for a reconciliation of GAAP to non-GAAP net income and earnings per share. So with that, let me now turn to slide eight for a review of our first quarter revenues. Total revenue for the first quarter was $89 million compared to $25.4 million in the prior year period. In terms of revenue composition, we saw growth from all three sources of revenue in the first quarter. Revenue from royalties for the quarter was $36.9 million, a 119% increase over the prior year period. This was driven primarily by the continued strong uptake of subcutaneous Darzalex utilizing Enhanced by our partner, Janssen. Product sales were $21.8 million in the quarter, up 167% from the prior year period product sales of $8.1 million. Growth in product sales was driven by higher bulk API sales to our Enhanced partners, Janssen, Roche, and Argenix. Demonstrating continued progress by our partners, collaboration revenue in the quarter totaled $30.3 million, up from $0.4 million in the prior year period. And during the quarter, we recognized $25 million in milestone revenues from Bristol-Myers related to the upcoming start of their Phase III trial for subcutaneous nivolumab with Enhance. In addition, the approval of Darzalex with Enhance in Japan and its anticipated launch resulted in $5 million in miles and revenues to Halosign. Turning to slide nine, you'll find a more detailed breakdown of our first quarter P&L. Let me begin with total operating expenses, which were $38.3 million in the first quarter, up 34% from $28.6 million in the prior year period. The overall increase in total operating expenses resulted from higher cost of product sales, which were $18.2 million compared with $5.8 million in the prior year period. And this increase in COGS was attributable to the markedly higher level of API sales versus the prior year period in support of our partners' products and programs in the first quarter. Research and development expenses of $9 million decreased 11% from $10.2 million in the prior year period. and SG&A expenses were $11.1 million, down 12% from $12.6 million in the prior year period. Total operating expenses, excluding COGS, were $20.1 million for the first quarter, compared with $22.8 million in the prior year period, consistent with the expectations we laid out as part of our annual guidance last quarter. Gap operating income for the quarter was $50.7 million compared to a gap operating loss of $3.2 million in the prior year period, reflecting our strong growth in revenues and leverageable business model. On a gap basis, net income for the quarter was $27.9 million or 19 cents per diluted share. This compared with a net loss of $6.1 million or 4 cents per share in the prior year period. As I mentioned, we'll now also be reporting key results such as net income and diluted earnings per share on a non-GAAP adjusted basis. In the first quarter of 2021, the largest adjustment made to arrive at non-GAAP net income and diluted earnings per share was for a $21 million one-time inducement expense related to the repurchase of a significant portion of our 2024 convertible notes. This is also a non-cash expense. On a non-GAAP-adjusted basis, net income was $54.3 million, or $0.37 per duality share, compared to net income of $1.9 million, or approximately $0.02 per duality share in the prior year period. With that, let me now turn to slide 10 for a discussion of our 2021 financial guidance. Our guidance is based on the latest information from our partners and our planned expenses for the year. Consistent with the strong growth we're seeing for our business, we are reiterating our guidance for total revenues of $375 to $395 million, which would represent year-over-year growth of 40% to 48%. Moving to the components of revenues, we expect revenues from royalties to double from 2020 levels. We expect product sales to increase 50% to 60% from 2020 levels, driven primarily by bulk API sales to our enhanced partners. We further expect revenue under collaborations to be in a similar range as the significant milestone revenues generated in 2020, driven by new clinical trial starts and commercial milestones of our partners. And reflecting our leverageable business model, we also continue to expect GAAP operating income for 2021 to be in the range of $215 million to $235 million, which would represent 49% to 63% growth over 2020. Moving to net income, we expect GAAP net income of $190 million to $210 million and non-GAAP net income of $235 million to $255 million. Moving to earnings per share, we are projecting GAAP EPS of between $1.25 and $1.40, representing growth of 37% to 54% over 2020 GAAP EPS. and non-GAAP earnings per share of $1.55 to $1.70, which would represent 38% to 52% growth over 2020 non-GAAP BPS. As Helen reviewed, we remain committed to returning capital to shareholders. We continue to expect to repurchase up to $125 million in our shares this year, pending market conditions and other factors, which would leave $75 million worth of shares available for share repurchases remaining under our current authorization. In support of our financial and capital return goals, we completed the sale of $805 million of convertible senior notes due 2027. Reflecting the strong cash flow and growth prospects for the company, we were able to secure highly attractive terms with a 25 basis point coupon and 50% conversion premium. We retired 80% of the previous convertible note, which was deeply in the money. And in doing so, we were able to mitigate dilution we would have otherwise faced from the outstanding 2024 convertible senior notes. We also used some of the proceeds to complete a $75 million accelerated share repurchase. So with that, I'll now turn the call back to Helen.
spk08: Thank you, Elaine. As you just heard, the developing pipeline, coupled with our financial outlets, places Helizine in the strongest position ever as a company. We look forward to strong growth in revenues, profitability, and cash flow in the coming quarters and years, which will allow us to deliver on our commitment to return capital to our shareholders, maintain long-term sustainable growth, and maximize shareholder value. To summarize on slide 11, we continue to expect multiple important value driving events throughout 2021. We expect a continued launch momentum for Darzalex SD and Fezgo with broadening adoption and use in the already launched market and through additional global launches. Two new products are expected to enter Phase 3 development, resulting in a total of four ongoing Phase 3 programs across seven indications. Recall these are the next wave of potential launches, Wave 3, with a time window for launch of 2023 to 2025. We project five new Phase 1 starts, resulting in a total of 12 products in or having completed Phase 1 testing by the end of the year. These representative development continues our Wave 4 potential launches, with the potential to launch in the window of 2025 to 2027. And we will work to create new revenue growth opportunities by seeking to sign new collaboration agreements and advance new targets into development our Wave 5. As a result of all of this progress, we're in a position to return capital to our shareholders, aiming to complete the planned $125 million share purchase for 2021. And finally, we'll continue to seek to identify and acquire a platform that can add to our long-term revenue growth. None of these results would have been possible without the amazing team we have at TaylorZine. I'd like to say my sincere thanks to each and every one of you for these terrific results. And thank you to everyone for your attention today. We'd now be delighted to take your questions. Operator, would you please open the call up for questions?
spk01: At this time, I'd like to remind everyone, in order to ask a question, press star 1 on your telephone. To withdraw your question, press the pound key. Please stand by and we compile the Q&A roster. Your first question comes from Dokim from BMO.
spk03: Hi, good afternoon. Thanks for taking my question. A question on Opdivo. Bristol is moving forward with the Phase III in renal cell carcinoma. Can you talk about what their clinical strategy is? Have they shared that with you? And are they looking for this Phase III in RCC as an anchor study and do other tumor types in Phase IIs?
spk08: Yeah, thanks, Phil, for the question. We are aware of the strategy, but BMS hasn't publicly commented on it. So unfortunately, we can't share any details. What I think we can talk about is the fact that the Rituximab and Hisela ODAC, the FDA said that moving forward, because of the more broad experience with RE-PH20, a separate controlled clinical study might not be needed for each and every indication. And we certainly saw that with the approvals of Dorsalix back and Fezgo while in the same tumor type we saw a broader indication than the studies conducted. So I think the way to think about this though is I believe if the FDA would feel that there were no safety questions there would be a possibility of a broader label than simply renal cell carcinoma but it really is going to be based on the discussion between the FDA and for Samara Squibb on the data generated and any outstanding safety questions that might exist.
spk03: And any particular reason why they chose renal cell as their first tumor indication?
spk08: None that I can share, though.
spk03: Okay. I understand. And on the commercial side of things, it looks like the launch of Fezgo is – much slower than FASPRO. Could you talk about what's driving that difference, whether it's the different cancer markets, breast cancer versus multiple myeloma, or how your associated partner is executing on the launches?
spk08: Yeah. In terms of the differences between the market, there are several. What we don't have is a specific cause and effect. But, you know, one of the key things is timing. For Darzalex FastPro, it was approved both in the U.S. and Europe in June of last year, whereas Fezgo was approved in the third quarter in the U.S. and only in December, and it's only now launched. in Europe. And so I do think we're going to see some strong growth of Fezgo, particularly as it starts to roll out in European launch markets. You highlight some other differences, though, multiple myeloma and older population, more Medicare covered, whereas the breast cancer patients perhaps more of a skew towards commercial pairs. So there could have been a little bit of more time taken to get on formulary for the commercially focused breast cancer patients, perhaps further leading to a slowing down with Fezgo. But I'll leave you with the takeaway that, yes, that's certainly a very strong start to FASPRO. It certainly exceeded our expectations for last year, as you know. I think Fezgo, having had to set up for all of the reimbursement and logistics in 2020, is going to start to show good growth in the U.S., And we're particularly excited about the launch trajectory that we hope to see in Europe, particularly given the demonstrated success they showed with Hercept and SubQ a number of years ago. So there'll be a good growth happening from Fez to this year. But as we stated, Darzalex SE will continue to be the dominant driver of our royalty revenues for 2021.
spk03: Great. That's helpful. Congrats on the quarter and all the progress.
spk08: Appreciate that, Bill. Thank you.
spk01: Your next question comes from Jessica. Hi from JP Morgan.
spk07: Hey there, good afternoon. Thanks for taking my questions. First one is, when you look at street models, which potential royalty stream do you see as most underappreciated by the street?
spk08: Yeah, let me turn that one over to Elaine to see which royalty stream do you feel is most underappreciated, Elaine?
spk06: Sure. So I think, Jessica, thanks for that question. I think the street has largely focused on DARS-Lex FastPro, which given Helen's comments and our public comments, I think is certainly driven by the strong performance and initial uptake that we've seen with DARS-Lex. I think One thing that we'd like folks to appreciate over time is the breadth of our royalty portfolio and partners and nearly 60 targets underlying those different partnerships. that we expect in these multiple waves of launches over time that should drive strong royalty growth beyond, you know, Darzalex, Fesco, et cetera, as being larger contributors. I think certainly as look to our Wave 3 product launches in particular as being those next drivers, and as Helen indicated, With the continued progress of Roche's Tocentric programs and indications that are being pursued for F-gartigimide, certainly we see those as potential significant drivers, as well as subcutaneous nivolumab with Bristol.
spk07: Okay, great. Thanks for that. And with respect to the share repo, just given how much you've already completed in the first quarter, is there any chance that you'll pull some of the remaining repo on the plan forward into 2021? And are there any other uses of cash beyond repo that look increasingly appealing?
spk08: Yes, let me ask Elaine to address that.
spk06: Sure. So as you know, Jessica, we have a balanced capital allocation strategy and that support of both capital return as well as funding internal and external growth via M&A. We've certainly been very focused on capital return. And I think we're just over 75% of our way through the $550 million three-year buyback plan, as you alluded to. And we continue to be committed to purchasing up to $125 million for 2021. which would leave $75 million remaining through the end of 2022 through that three-year plan. I would say the specific timing of repurchases is based on different factors, including market conditions, et cetera. But we continue to be focused on capital returns. I think beyond capital return, we continue to think that it is appropriate as part of that balanced capital allocation strategy to continue to fund the substantial internal growth drivers that we have fueled by Enhance, as well as potential to bring in another external platform technology that could leverage our existing capabilities and expertise to drive additional value long-term for shareholders. Thank you.
spk01: Your next question comes from Jason Butler from J&P Securities.
spk04: Hey, it's Roy. I'm for Jason. I just want to make sure I was clear on the first line, multiple model, and the 3% market share. Is that the overall market, or is that the additional portion that's converted to subcutaneous?
spk08: That was the overall market, I believe, that was being referred to, Roy. They didn't break out by sub-Qs, but it's overall. Have they ever broken out? They didn't break it, break it. I just want to make sure of the two.
spk04: Okay, they've never broken out sub-Q?
spk08: They haven't. J&J has not.
spk04: Okay, great. And then can you remind us what the light chain amyloidosis total market opportunity is in their view?
spk08: Yeah, the epidemiology around this is there's about 4,500 incidents like TNMLI doses patients in the U.S. annually. And it's a similar number in Europe. So think about the total opportunity, I think, globally of being about 10,000. incident patients. The indication is for newly diagnosed. Now, this is an accelerated approval, Roy, and specifically there are some conclusions based on cardiac disease, so you need to take that $10,000 and reduce it to get the opportunity. So I think what's exciting here is big unmet need for patients and a nice incremental add as this indication is only approved as a sub-Q, not as an IV.
spk04: Okay.
spk08: Thank you.
spk01: Your next question comes from Anita Deschamps from Bloomberg Capital Markets.
spk05: Hi, good afternoon. Congrats on the progress and thanks for taking my question. I was just wondering, Helen, in the last call you had mentioned about, you know, that you were kind of re-engaging with your partners to sort of have the revisit their portfolios, see if they will be able to identify new targets that could move forward into the clinic. I was just wondering, so how many sort of new targets that you are likely to see this year or next coming into the clinic?
spk08: As we entered this year, Anita, as you know, we've said five new phase one starts, which represent the line of sight new targets we have coming in, and we've already started two of those. I can tell you our discussions with partners are ongoing, but we have no updates I can give you with regard to whether we will extend the number of new starts this year, or perhaps some of them could take into next year to actually start, just depending on where those targets are in development. but this is an ongoing uh effort that we were just continuously in so we're excited about the size that we'll add this year and i'm very confident we'll be adding more next year just based on the discussions we have can't be absolutely sure yet based on timeline that any will start in any additional ones will start in 2021 yet okay great thank you and just just one more question on um darcy like yourself uh
spk05: So I think from what J&J had, or Janssen had talked about it before, there were about 40% of the patients that converted to the sub-Q form. So eventually we would expect like a majority of the population to adopt the sub-Q version, and we could kind of think about that for the other candidates using enhanced.
spk08: I do think Dora's Alexa, as you mentioned, is off to a strong start. And I think the comment on the 40% actually, I believe, was made by us based on data last October that showed that, and this was from Symphony, they showed that 40% of use in the U.S. was with this sub-Q. We certainly are delighted with the performance. We know that just based on our royalty revenues, it's even higher than that now in the U.S., and we're seeing good penetration around the world as well. I think if you think about all of the other products in the portfolio, it really will be dependent on the value proposition that physicians see. There's no doubt that DARS-ELECT is a very strong value proposition, but we've got very strong value propositions in the rest of our portfolio. What we do is we take a look at what we think the offering brings versus the competition and per patient, and we do a range around that as to what we think the peak penetration will be. You're absolutely right. This is a great opportunity here for other products to have a strong market uptake as well, just based on what we're seeing for Darzalex, not just in Europe where we've seen strong performance before, but also in the U.S.
spk05: Okay. Thank you.
spk01: Your next question comes from Greg. It's from Goldman Sachs. Great. Thank you for taking my question. Congrats on all the great progress. I've got two questions, if I could. My first just has to do with the broader portfolio, in particular the 16 products that you list on slide 5. We're just wondering if you could maybe remind us if there's certain products where the current IV infusion times are perhaps considered longer perhaps than others that might facilitate greater conversion over to any potential substitute that might get eventually approved. And then my second question, I just wanted to revisit the company's prior comments around looking for additional technologies. And I'm just wondering, you know, as we have been talking about this over the past several quarters, I'm curious if there have been any changes in the BD environment, whether it is the number of potential assets, the quality of the assets, or potentially the prices of the assets that may have significantly changed. Thanks very much.
spk08: All right. So turning to slide five then, Greg, as we're taking a look at the products that are listed here, there are a whole range of infusion times, as you point out. And obviously, some of them are perhaps 30-minute IVs. Some of them more range towards the one and a half to two hours. What I think is important is... duration of infusion is one aspect. But what we're seeing with our partners is not simply reducing the time of administration. There are other, I think, important strategic plays that they are pursuing here. If we think about some of the products where the goal might be to get the patient to be able to use the product at home more easily, there a sub-Q is a significant advantage, obviously, over an IVP. We've got other partners who are working to develop drugs in combination so similar to what Roche succeeded with with Fezgo of two antibodies together and that was I'll mention that for Samara Squibb when they started working with us have a vision to be able to take care more into the community oncology setting to make it easier for patients. And so as you think about what the value proposition is, I think there's the strategies, there's the duration of administration, all very important. And for each of the products that you see listed here, as well as the five that we expect to start this year, there is a compelling value proposition as to why this will bring competitive differentiation for each partner for them to take it to the market. If I could move to the question of BD, yes, as we mentioned, our goal is to seek to find another platform that we can do what we've done with Enhance, which is license it to multiple partners and be able to grow revenues perhaps beyond what the originator was able to to do and so we are very actively looking at different opportunities at the moment great um i would say the environment has got a good number of assets um pricing is perhaps a little bit down as to what it was perhaps four or five months ago. So that is a bit of a positive. But, you know, I would say no major change in the overall environment of the assets that we are looking at. And, you know, we will take our time. We have the luxury of time based on the strong growth we're projecting for enhanced. So we're not rushing into this. We're looking for something that we feel is a great fit for our capabilities and our business model. And we'll complement that effectively. So,
spk01: uh we're gonna we're gonna find the right thing okay that's great thank you so much thank you greg as a reminder to ask a question press star one your next question comes from joe cantara from piper sandler hey guys uh thanks so much for taking my questions here uh just just do somewhat related i'm wondering if you could help
spk02: contextualize how much of the growth of FastPro that you're seeing and its contribution to the top line is perhaps being muted to some degree by the contraction of some of the legacy products. And then somewhat relatedly, I think Gemmab said some Nordic countries are seeing 90% FastPro conversions, while others are around 30. Do you guys have any sense around the overall conversion rates across the full European geography? And can you actually back into that number based on the royalty you receive? Thanks.
spk08: I would say, let me take the second part first. We heard the comments from GenMap and really echo the Chief Commercial Officer there to say it is very difficult to get detailed penetration data from Europe, so we can't really comment directly. um on that by geography we we have a general sense from our royalties joe is to overall share in europe versus uh the us but we certainly don't know on a uh market by market um basis unfortunately uh but obviously the core message is that we're delighted with the strong uptake That we're seeing in the U.S. where our last reported data was the 40%, but obviously that has continued. And this sense that they talked about the Nordic markets being at 90% and other markets at 30% obviously shows that the value proposition is being well received around the world. With regard to the growth of Fasbro, we certainly are seeing a contraction to your question on the legacy product. So the ongoing impact of biosimilars on Perceptin and also Rituxan is muting it modestly. We did predict and stated this year we expected to see a continued decline in the royalty revenues. That is continuing at the pace we expected. And it does somewhat mute the dollars like FastPro. But on a relatively modest basis, we're obviously very pleased with the growth that we're seeing in FastPro this year.
spk02: Okay, got it. Thanks for taking my question.
spk08: Thank you.
spk01: That was our last question at this time. I will now turn the call back over to the presenters.
spk08: Right. Well, we really appreciate everyone for your support and for your attention. As you've heard, we continue to execute very well against our strategy, and we're excited with the progress that our partners are showing in their development of more enhanced enabled products. We look forward to future launches of Waves 3 and 4, following on the great success we're seeing with our Wave 2 launches. Thank you so much for your attention, and we look forward to seeing you next quarter. Say bye now.
spk01: This concludes today's conference call. Thank you for participating.
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